In response to India's increasing reliance on petroleum imports, India plans to bring online the country's first strategic petroleum reserve (SPR). The first phase of India's SPR includes three locations (Visakhapatnam, Mangalore, and Padur) in southern India with a combined capacity of 39.1 million barrels of crude oil. The Visakhapatnam facility on the eastern coast began filling its underground caverns last summer. The Mangalore and Padur facilities are expected to be completed in late 2016, according to FACTS Global Energy. Once filled, these three facilities would provide an estimated 13 days of net oil import coverage, based on 2015 consumption and production data.

India's ultimate goal is to have an SPR that provides 90 days of net import coverage. The Indian government unveiled plans to add another 91 million barrels of SPR capacity in a second phase by 2020, although these facilities are still in the planning phase. The Indian Strategic Petroleum Reserves Limited (ISPRL), a special-purpose legal entity owned by the Oil Industry Development Board, would manage all of the SPR facilities.

The significant drop in international oil prices since mid-2014 provides India with an incentive to speed up construction and filling of its SPR. India is seeking to finance the second phase of its SPR partially through commercial agreements with foreign oil producers who can lease storage. India is currently negotiating with the United Arab Emirates' national oil company, ADNOC, to lease 5.5 million barrels of the Mangalore facility. Two-thirds of this volume would be available for India, and ADNOC could store the remaining volumes or sell the oil in the domestic market.

Other companies such as Kuwait Petroleum Corporation, Saudi Aramco, and Shell have also expressed interest in India's storage facilities. In February 2016, India proposed a federal income tax exemption for the sale of stored crude oil by foreign firms to the local market as an incentive for foreign oil companies to lease space, which in turn would help finance the SPR program. Relatively high current global oil inventories that have reduced available storage space could be another driver for crude oil producers to seek new storage capacity. Even though India has incentives for foreign investors to store crude oil in its SPR facilities, companies are waiting for regulatory issues to be settled, such as local taxes and India's ban on crude oil exports.

The gap between India's oil demand and supply is widening, with demand surging ahead. Based on EIA estimates, imports supplied 75% of the country's total liquids demand, as India's total liquid fuels consumption in 2015 reached more than 4 million barrels per day (b/d), compared with about 1 million b/d of total domestic liquids production.

Demand for crude oil and petroleum products in India is projected to continue climbing, further increasing the country's oil import dependence. In addition to India's rising consumption, filling the remainder of the country's first phase of its SPR will further increase demand. Although India has diversified its crude oil import slate in the past few years, adding imports from countries in Africa and Latin America, it still relies on Middle Eastern countries for most of these imports (58% in 2015).